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On free apps

This post is sort-of a follow-on to @daveaddey’s post on the average app; although in reality it’s a follow-on to the response that comes out every time a post on app store revenue is written.

Events go like this:

  1. Some statistic about app store revenue.
  2. “Your numbers include free apps. You shouldn’t include free apps.

Yes you should. The revenue that comes from the app store is indeed shared across all apps, free and paid. Free apps contribute significantly to the long-tail price distribution of apps on the store, and the consumer perception that apps shouldn’t cost much. Some of them generate revenue through in-app purchase: revenue that probably is counted in Apple’s “we’ve given $5bn to developers” number. Some of them will generate revenue through iAd: it’s not clear whether that’s included in the $5bn but it’s certainly money paid by Apple to developers. Similarly, it’s not clear whether money paid through Newsstand subscriptions (again, in free apps) counts: it probably does. Some of them have not always and will not always be free; again these apps make money directly from Apple.

A lot of free apps come from companies that do other things, but feel a marketing need to be on the app store:Amazon, O2, facebook and others go down this route. In these cases there is absolutely no money to be made from the app directly, though there are possibly many sorts of collateral benefits. It costs Amazon money to write the Windowshop app, but they bank on users buying more things from them than if the apps doesn’t exist.

On the other hand, some free apps are just written by developers who want to put a free app on the store so that it can act as their portfolio when they try to get work as iOS app developers.

So yes, other business models exist. But when talking about money made from the app store, you have to include all of those products that don’t make money on the app store. Ignoring the odd outlier is fine statistics. Ignoring large quantities of data that make your conclusions look bad is not science; it’s witchcraft.